Hermès Sales Rise 3.2 Percent

Brisk sales of leather goods powered first quarter while perfumes, watches recede.

PARIS — Robust gains in leather goods helped Hermès International post a 3.2 percent rise in first-quarter sales to 428.4 million euros, or $560.3 million.

This story first appeared in the May 8, 2009 issue of WWD.  Subscribe Today.

At constant exchange rates, however, sales were down 4.7 percent. Revenues were pushed up by 33 million euros, or $43.2 million, as the U.S. dollar and Japanese yen appreciated against the euro. Dollar figures are converted from euros at average exchange rates.

Patrick Thomas, chief executive officer of Hermès, trumpeted sales in the brand’s own boutiques, which account for about three-quarters of revenues, as giving the truest picture of the luxury firm’s resilience amid the economic slowdown. They advanced 16 percent at current rates and 6 percent at constant exchange.

Excluding Japan, which remains extremely sluggish, sales in Hermès boutiques rose 11 percent at constant exchange in the three months ended March 31.

“Excluding Japan, it’s almost as if the crisis had zero impact on sales in our stores,” he said in an interview.

By contrast, wholesale volumes fell 27 percent at constant exchange as specialized retailers reduced orders of perfumes, watches and tableware as a measure to preserve cash during the crisis and keep inventories lean.

Thomas noted that retail sales of Hermès perfumes worldwide are up, and predicted wholesale sales of fragrances would turn positive in April.

Asked about recent trading in general, the executive said, “April is good. The trend is better,” and suggested the worst may be over, except for a declining Japan.

“I think the U.S. is going to catch up soon. We have good vibrations,” he said. “Even when you look at sales in our own stores, we see positive trends; more positive than in the previous months.”

Leather goods and saddlery was the star category, with sales rising 10.2 percent at constant exchange. Thomas cited brisk business across the board with leather bags, from stalwart styles like the Kelly, Birkin, Plume, Bolide and Evelyne bags to newer styles like Silky City, made of silk and leather, and the Jypsière, a style by Jean Paul Gaultier, designer of Hermès’ ready-to-wear for women.

All other product categories posted sales declines at constant exchange: down 1.4 percent for silk and textiles; 5.4 percent for rtw and fashion accessories; 29.9 percent for perfumes; 35.7 percent for watches, and 30 percent for tableware. However, Thomas noted sales of silk scarves were up: “Not the ties; ties are down.”

Asia-Pacific, which accounts for 23 percent of Hermès sales, remained the most buoyant region as the French luxury firm logged an 18.3 percent gain at constant exchange rates, a stark contrast against Japan, where sales declined 19.3 percent. Sales fell 5.3 percent in the Americas, 3.7 percent in France and 6 percent in the rest of Europe.

Hermès said it is targeting “steady” sales for the full year and would continue to expand its retail network, opening or renovating more than 20 stores this year, primarily in Asia and the United States. Stores in South Korea and Las Vegas opened in the first quarter, and a concession in Japan was converted to a company-owned unit.

In a research note, HSBC analyst Antoine Belge described the first-quarter performance as under expectations.

“In terms of organic sales growth, management expects Japan to be down about 10 percent, the Americas and Europe to be flattish to slightly up and Asia ex-Japan to be up about 15 percent,” the note said.

Hermès shares fell 2.1 percent to close at 100.70 euros, or $133.98 at current exchange, on the Paris Bourse.